Industry super funds got a relatively free pass during the financial services royal commission that cut down banks, insurers and retail funds.
But claims of painfully slow payments and the run-around given to grieving families by Cbus is right up there in the class of banks behaving badly.
The corporate regulator’s explosive allegations that the construction industry-linked fund dragged out the death benefits or disability payments for as many as 10,000 members should be a wake-up call for all industry funds that have been pushing to move deeper into financial advice.
Despite funds long hiding behind a soft not-for-profit image, regulators now rightly see them as fair game just like any bank or profit-driven retail fund.
The allegations contained in ASIC’s Federal Court filing should shows Cbus’s behaviour wasn’t isolated to a handful of disputed claims. Rather it was systemic and in nearly half the cases payments were alleged to have been delayed for more than a year. It is likely thousands more members could be affected beyond the short window covered in the Federal Court action.
Worse still, Cbus’s board, led by former federal treasurer Wayne Swan, ignored warnings about the poor state of payments from its own fund administrator.
ASIC has estimated about $20m has been lost by claimants, although the emotional toll for delayed payouts in some cases to grieving families could be much bigger. If the claims are proven, Swan needs to resign.
The ASIC claims go to the heart of the suspicions around the running of the nation’s biggest super funds, which is that their governance hasn’t kept up with the breakneck growth in the funds across both members and financial assets.
In Cbus’s case it has more than $94bn under management and 920,000 members.
Many of the funds are sitting on the nation’s biggest pools of capital, as retirement savings for millions, yet the boards are home for retired politicians and lifelong union or business delegates.
Cbus is already under the spotlight for its relationship with rogue construction union the CFMEU. All three CFMEU-appointed board directors have stepped down from the fund and the super regulator has ordered an independent review of the fund and its relationship with unions.
Industry funds have long had an uncomfortably close arrangement with life and disability insurance which is highly complex, murky and at times an expensive financial product sold through the simple measure of ticking a box by signing on to a new super fund.
It was only in 2019 that super funds were stopped from automatically providing insurance to members under the age of 25 or where account balances were less than $6000.
For their part, super funds argue members get the benefit of bulk coverage for life insurance through superannuation and puts the insurance product within reach of people who ordinarily wouldn’t have it.
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